Why Go to FQDN?

We have a single “TREE” in our Forest. It’s not a FQDN (example : “ourdomain”). We have made the normal migration thru the years from Win NT, 2k, Now 2003 as our Domain Controller. Still running 99% windows xp for the 1000+ users. We have looked at the exchange 2007 and it looks like we need to be on a FQDN. Is this true?, if so, what else would benifit us being on FQDN? is the migration tool “Rendom” the best tool?

Thanks
Stephen